Finance ministry opposes Mari gas supply to Engro

Argues fertiliser producer has not paid GIDC, filed court cases against govt

ISLAMABAD: The Ministry of Finance has fiercely opposed allocation of gas from Mari field to Engro Fertilizers, arguing that the fertiliser manufacturer has defaulted on payment of gas infrastructure development cess (GIDC) to the government.

The ministry has also resisted blanket approval of the Economic Coordination Committee (ECC) for providing unutilised gas from Mari Petroleum Company to the fertiliser industry, say officials aware of the development.



This comes after Mari Petroleum informed the Ministry of Petroleum and Natural Resources that it had over 91 million cubic feet of gas per day (mmcfd) that could be supplied to Engro Fertilizers and Genco-2 power plant.

The petroleum ministry is now seeking go-ahead for allocating 60 mmcfd to Guddu power plant and 31 mmcfd to Engro Fertilizers. It has also sought blanket approval for providing any additional gas from Mari Petroleum’s reserves to the fertiliser manufacturers.



Responding to the proposals, the Ministry of Finance pointed out that Engro had been enjoying a concessionary tariff, but it had defaulted on GIDC payment and initiated court cases against the government and its companies. “This has created serious gas price distortion in the fertiliser industry.”

Therefore, the ministry said, the proposed allocation of 31 mmcfd of gas to Engro could not be supported unless the company met its obligation in relation to GIDC and withdrew legal cases against the government.



It suggested that the Ministry of Petroleum should specifically seek ECC’s green signal in case of unutilised gas volumes and an umbrella approval of the committee could not be supported.

In its response, the petroleum ministry contended that the litigation process initiated by Engro Fertilizers against GIDC was pertaining to gas supply to the company’s new plant, which should be dealt with separately.

The proposed allocation of 31 mmcfd was for the old plant and it had not withheld GIDC and had no outstanding payments. On the other hand, the finance ministry has given its backing to gas supply from the Mari field to the Genco-2 power plant.

Earlier, the ECC, in its meeting on February 22, 2016, had agreed on diverting 60 mmcfd to Engro Fertilizers from the Genco-2 plant as originally it was meant for the fertiliser industry.



Of the total, 34 mmcfd was allocated to Fauji Fertilizer, 13.5 mmcfd to Fatima Fertilizer and 12.5 mmcfd to Engro Fertilizers. Due to  fear of shutdown, Mari Petroleum has continued to provide required gas to Engro.

Before that, the ECC had allocated 183 mmcfd to power producers with the consent of then prime minister on April 23, 2010.

This was achieved by curtailing supply of 53 mmcfd to consumers of Sui Northern Gas Pipelines, 70 mmcfd to consumers of Sui Southern Gas Company and 60 mmcfd to fertiliser plants connected to the Mari field. As a result, 60 mmcfd was diverted to the Guddu thermal power station.

Published in The Express Tribune, May 4^th, 2016.

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